News:

The Book of the Diner is well worth preserving. I only wish it had reached a broader audience when it might have mattered more. That is a testament to the blindness of our culture. If there is a future to look back from, one difficult question historians will have to ask is how we let this happen, when so many saw it coming. This site has certainly aggregated enough information and critical thinking to prove that.[/b]

What’s Scarier Than Student Loans? Welcome to the World of Subprime Children

Income share agreements sound like a better deal than today’s student loans, but what will they do to society?

By Malcolm Harris

Mr. Harris is the author of “Kids These Days: Human Capital and the Making of Millennials.”

May 11, 2019

Credit Tim Lahan

As American families refresh the wait lists and weigh their aid offers, yet another cohort of children sets foot into our disaster of a national higher education financing system. Student debt in the United States is over $1.5 trillion, with half of it accumulated in the past decade. Income share agreements — in which borrowers pledge a percentage of future income against debt — present the first plausible alternative. That’s what we should be afraid of.

There’s a lot to dislike about the student debt status quo, which is now almost completely controlled by the federal government. Although the Democrats don’t like to talk about it, the Obama administration effectively nationalized a vast majority of student borrowing in 2010 when it ended federal guarantees for outside lenders as a cost-cutting provision of the Affordable Care Act. The government has a number of advantages as a lender, including an exemption from regulations on debt collectors and the ability to print money. Private investors have thus been pushed to the margin of what has become the largest nonmortgage debt category in the United States; the federal government has over 90 percent of the market.

Income share agreements, or I.S.A.s, began as an experimental model of education funding. One of the first income share programs was designed in the 1970s with the help of the Nobel Prize-winning economist James Tobin at Yale. It was poorly structured in a number of ways — students signed on as a class and kept paying until the whole debt was gone, but wealthier graduates who were able to pay a large chunk at once could opt out — and it closed down (without full repayment) in 2001. One big problem with I.S.A.s is that there is no collateral to these loans. You can’t repossess a classics degree. And as Gary Becker, the University of Chicago neoliberal economist, once lamented, “courts have frowned on contracts which even indirectly suggest involuntary servitude.”

Purdue and a few other universities have come up with I.S.A. programs that could point the way forward. They assess different rates and repayment durations depending on the borrower’s major. If you’re a chemical engineering major at Purdue, you enjoy better terms than if you study English: Under its I.S.A. schedule, chemical engineers are expected to repay $33,000 at the rate of about 8.5 percent of their income for seven years and four months, while for English majors it’s almost 15 percent for nine years and eight months. But these university I.S.A.s are meant to supplement rather than replace student loans.

Now private capital is starting to find its way into I.S.A.s, through a handful of online computer science training programs. With names like Pathrise, Thinkful and the Lambda School, these “career accelerators” provide tech companies with certified coders and provide participants with a credential in months, not years. Students in these programs can pay by way of an I.S.A. that is financed and serviced by investors gathered under their own Silicon Valley-style names like Leif. By my estimate, the private I.S.A. sector has yet to reach 1 percent of the $100 billion-plus in annual higher-education lending, but it’s growing fast.

A company called Big League Advance has started lending to algorithmically approved minor-league baseball players; something similar might appeal to college athletes whose scholarships fail to cover all their costs. From there, it’s only a few steps before investors sets their sights on other reliable investments: Ivy League finance, Stanford biology, engineering at flagship state universities.

What’s the appeal of an I.S.A. over a regular student loan? From a capitalist’s perspective, the federal government has a weakness: It treats all borrowers the same. Borrowers face the same interest rates whether they are mediocre art students or valedictorians studying quantum computing at a top engineering school. But private I.S.A. lenders can skim the cream of students off the top.

The returns on higher-education loans are already high — new student-loan borrowers will be paying the Treasury 4.5 percent to 7 percent for the 2019-20 academic year — so private lenders can offer better terms to students who are the most reliable bets. And while it’s difficult to fit all but the bare necessities of college life under federal loans limits, promising students will be able to borrow enough with a private I.S.A. to simulate the worry-free college experience of their wealthy peers.

If you can convince investors you’re going to be rich for the rest of your life, why spend your college years poor? I.S.A.s bridge the gap. It’s hard to think up a better advertisement for free-market capitalism.

But I.S.A.s are premised on the idea of discriminating among individuals. Once the high-achieving poor and working-class students have been nabbed by I.S.A.s, the default rate for federal loans starts to rise, which means the interest rates for these loans have to go up to compensate. A two-tiered borrowing system emerges, and the public half degrades.

If I.S.A.s take off as a desirable funding source, it’s inevitable that they will begin to reshape childhood. Instead of just trying to build a résumé that appeals to admissions committees, students would spend their adolescence trying to build profiles that scan as successful to investors. Every child becomes his or her own start-up. I.S.A.s will no doubt protect their child-ranking algorithms as trade secrets, but if years of research on tech bias is any guide, we can expect they’ll perpetuate existing inequalities.

For students who are risky bets, rated as less than investment-grade, lenders can tweak repayment periods and terms until the algorithm approves. Computers can make practically infinite distinctions among potential borrowers, and there’s nothing to stop future applicants from optimizing themselves into anxiety and depression even worse than what we see now.

Welcome to the world of subprime children. This is the path we’re on, and it ends with teenagers being careful to always smile in front of their laptop cameras lest the I.S.A. algorithm find them uninvestably dour. The alternative is to reconsider education as a social good and make capitalists pay for it, not as an investment but via taxation. If we’re not careful, investors from Silicon Valley and beyond will reshape the country’s children in their own image.

Malcolm Harris (@BigMeanInternet) is the author of “Kids These Days: Human Capital and the Making of Millennials.”

Map: Cities in the South are being held back by student debtAarthi SwaminathanFinance WriterYahoo FinanceMay 15, 2019

There are more than a trillion dollars in outstanding student loans, affecting millions of Americans, and a new study by WalletHub details how borrowers in the South are feeling the pain more than most.

The study — which looked at 2,510 cities across the U.S. and divided the median student loan balance held by adult borrowers living in those cities by their median earnings — identified cities when residents were most and least indebted relative their salaries.

Thirteen of the bottom 20 cities were in the South (i.e., south of the Mason-Dixon line and east of the Mississippi River). On the other end of the spectrum, 10 of the top 20 cities with the best debt-to-earnings ratio were in California.(Graphic: David Foster)View photos(Graphic: David Foster)

"What's worrying is that overall, post-college debt is a huge financial burden to Americans,” WalletHub analyst Jill Gonzalez told Yahoo Finance. “High balances, combined with long payoff timelines and low earnings, make graduates delay other financial goals like owning a home or saving for retirement."‘Trillion-dollar black hole’ caused by student debt

The hotly debated issue of student loans features a wide cast of characters from presidential candidates — who are calling for broad cancellations of debt — to economists who consider it a “micro” problem.

But with more borrowers going delinquent and defaulting on their loan repayments — as well as a gradual decay of existing loan forgiveness programs — the student loan crisis has created a “trillion-dollar black hole in our financial market” that has left people “drowning under the weight of this unprecedented burden,” former CFPB student loan ombudsman Seth Frotman told the Committee on Financial Services on Capitol Hill in March.

In the WalletHub study, the cities in the 99th percentile — those with borrowers who saw their student loans comprise of around 68% to 85% of their income — were at the highest levels in Sun City West in Arizona, followed by Green Valley in Arizona and Palatka in Florida.Student debt has soared in the 21st century. (Graphic: David Foster/Yahoo Finance)View photosStudent debt has soared in the 21st century. (Graphic: David Foster/Yahoo Finance)

The median student debt held by borrowers in those three cities was between $17,000 to $21,000, while their earnings were between $21,000 to $25,000, yielding a student debt-to-income ratio of more than 83%.

"The common thread among the 99th percentile was low median earnings for bachelor's degree holders, some even as low as $20,000 annually,” Gonzalez said. “This is why even cities with a lower amount of debt such as Forest Park, GA or Lexington, NC still manage to have a student debt to median earnings ratio around 75%.”What the top cities have in common

Conversely, cities in the top percentile saw a student debt-to-earnings between 15% at the lowest end and 21%.

Let's see... Student Debt is around $1T. So if you got 1000 Billionaires to contribute $1B Each you could solve the problem! lol. According to Forbes, there are only 540 Billionaires in the FSoA, and I doubt Chinese Billionaires will contribute to solve this problem.

Philanthropist Robert F. Smith delivered a life-changing commencement speech Sunday at Morehouse College in Atlanta.

The billionaire businessman, who received an honorary degree from the historically black school, surprised the nearly 400 graduating seniors by announcing his family would provide a grant to pay off student debt for the entire Class of 2019.

“On behalf of the eight generations of my family who have been in this country, we’re gonna put a little fuel in your bus,” Smith said in a video posted on social media.

“This is my class,” he added, “and I know my class will pay this forward.”

The gift to the private, all-male school is said to be worth about $40 million. It comes in addition to a $1.5 million donation Smith gave Morehouse earlier this year for scholarships and a new park.

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Some students told the Atlanta Journal Constitution they were graduating with up to $90,000 in debt.

Smith is a Cornell grad, and has an MBA from Columbia University. He founded Vista Equity Partners, a software and technology investment firm, which has $46 billion in assets, according to its website.

He is the richest African-American in the United States, with a net worth of $5 billion, according to Forbes. This year he ranks #355 on the Forbes Billionaires List of the world’s richest people.

Smith has Hollywood ties as well after investing in Hidden Empire Film Group — which is run by Deon Taylor and Roxanne Avent. The group’s recent releases include Meet the Blacks (2016), Traffik (2018), and The Intruder, a psychological thriller released on May 3. The film stars Meagan Good, Michael Ealy, and Dennis Quaid. To date, it has grossed $28 million domestically.

People are fleeing the US to keep from paying off their student loansAllana Akhtar

India Painted Elephant Shutterstock / ostill

Some student-loan borrowers are leaving the US to keep from paying off their debt, according to CNBC. The federal government can't garnish wages for borrowers working abroad. Yet the loans do not go away, and they are likely to balloon after late fees and interest. Visit Business Insider's homepage for more stories.

Some student-loan borrowers have fled the US to keep from paying their loans, according to a report on CNBC.

One borrower told CNBC he relocated to India after failing to find a well-paying job after college. There, he found the cost of living much cheaper than in Colorado. While there isn't data surrounding how many borrowers have gone abroad to avoid paying off debt, CNBC observed Facebook groups and Reddit channels where people described fleeing the US over the student-debt crisis.

The federal government can garnish wages and tax refunds for borrowers working in the US but not for those working abroad. The debt does not go away, however, and typically would increase quickly with compound interest and late fees. Borrowers who reenter the US and continue not to make payments could be sued, according to Joshua Cohen, a lawyer specializing in student-loan debt.

Americans who stick around are struggling to pay off their loans. Student-loan debt has the highest 90-day delinquency rate of all other household debt, like mortgage and auto loans, according to Bloomberg. Some economists say nearly 40% of borrowers could default on their loans by 2023.

Solutions to student debt are likely to be at the forefront of the 2020 presidential race. Sen. Elizabeth Warren, a 2020 Democratic presidential candidate, has offered a plan to eliminate student debt for 42 million Americans, funded by taxing billionaires.

One borrower who fled to Japan told CNBC she worked multiple jobs to pay off her loans but still could not afford health insurance. "I wish I could come back to America and not be scared," she said.

At HBCUs, crushing student loan debt is a symptom of even bigger problems

Sonny Ross / for NBC News

“When these institutions were created they weren't created on equal footing with historically white institutions,” one expert said.Illustration of hand pouring change into a cracked piggy bank shaped like a Paul Quinn College building. A group of college graduates stand on the lawn.Sonny Ross / for NBC NewsJune 9, 2019, 8:10 AM AKDTBy Dartunorro Clark

When Michael Sorrell became president of Paul Quinn College 12 years ago, he assessed the dire situation his school was in and made a bold choice: No more football.

But to him, eliminating the program was the only way the historically black college in Dallas, which was founded in 1872 by a group of preachers from the African Methodist Episcopal Church to educate freed slaves and their children, could get back on track.

Football had cost the school roughly $600,000 to $1 million a year, he said, and scholarships went mainly to the players. Meanwhile, other students struggled, faculty and staff members were leaving, and buildings had fallen into disrepair.

"We were roughly 18 months to 24 months away from closing. We had financial problems. We had academic problems. We had morale problems, and it was the prototypical scenario for an institution that had been struggling for a long time and the end of the road was coming,” he told NBC News in a phone interview.

The challenges Paul Quinn College faced are not unique, experts said, even if its solution was one of a kind.

Last month, when billionaire philanthropist Robert Smith thrust historically black colleges and universities (HBCUs) into the national spotlight by pledging to eliminate up to $40 million in student loans for Morehouse College's almost 400 graduates, his gift was heralded as both historic and likely life-changing for those students.

But student loan debt is merely a symptom of a systemic problem that dates back to the schools' beginnings, according to Marybeth Gasman, a professor at the University of Pennsylvania and an expert on HBCUs.

“When these institutions were created they weren't created on equal footing with historically white institutions,” she said. “So what happens is basically you end up with a situation where the majority (white) institutions continue to get wealthier because wealth begets wealth, and the HBCUs are behind.”Philanthropist Robert Smith pledges to clear student debt of Morehouse college gradsMay 20, 201901:30

HBCUs were founded and subsidized by states, the federal government, philanthropists or churches to educate black Americans who were barred from attending majority-white colleges. But in recent years, financial woes, among other issues, have forced a number of the schools to the brink of closure or put their accreditation at risk. And, lacking large endowments for generous scholarships compared to many non-HBCUs, much of the burden can fall on the students to depend on substantial loans to make up gaps in aid.

Gasman said that more than 70 percent of those who attend HBCUs rely on federal Pell Grants, which is aid for students who demonstrate financial need. But for these students, there's usually still a gap between the Pell Grant money and the aid the school offers — which is where loans come in.

Student borrowers owe close to $1.5 trillion in student loan debt nationwide. However, when race is factored in, black college graduates owe, on average, $7,400 more than their white peers, and that number is expected to more than triple to $25,000 in the next few years, according to the Brookings Institution, a Washington-based think tank.

A 2016 United Negro College Fund (UNCF) report also found that a higher percentage of students at HBCUs — 80 percent — used federal loans to pay for college compared to 55 percent of students not attending an HBCU. It also found that a higher percentage of students — 12 percent — at HBCUs combine federal, state and private loans to finance their education, compared to 8 percent of non-HBCU students.

HBCU students also borrow more money and are more likely to tap into unsubsidized federal loans and rely on their parents to also take out loans, according to Gasman.President Michael Sorrell of Paul Quinn College poses with students in Dallas, Texas on May 4, 2019.Roberto Hernandez / Paul Quinn College

“And so if we could get more of an investment in HBCUs, they could have more institutional aid,” Gasman said, referring to federal and state funding inequities.

Advocates say a concerted effort from lawmakers is needed to ensure HBCUs get equal and consistent access to federal funds — though being so reliant on government dollars has its pitfalls.

Since the Higher Education Act of 1965, HBCUs have received funding from the federal government — called Title III funding — to, in part, make up for past discrimination in higher education. States also provide funding to some of these institutions. However, those sources of funding have not been steady because of unequal funding in state budgets and largely stagnant funding at the federal level.

Democratic Sens. Kamala Harris of California, who attended historically black Howard University, and Elizabeth Warren of Massachusetts have proposed plans to boost HBCU funding on the 2020 campaign trail. Warren has one of the boldest, proposing an unprecedented $50 billion investment in HBCUs.

Victor Santos, the director of government relations at the Thurgood Marshall College Fund, said that these plans are admirable, but HBCUs need a long-term funding solution.

Researchers from the UNCF raised those concerns in a report for the American Council on Education earlier this year in which they found that HBCUs are more dependent on federal, state and local dollars than their counterparts. For instance, those resources make up 54 percent of revenue at HBCUs compared to 38 percent at other colleges and universities. Because of this, the report warned, HBCUs are particularly “susceptible to economic downturns, state divestments from higher education, or policy changes.”

Santos said that one way the government could help HBCUs is to steer federal research contracts to many of these schools, which could pump big dollars into not only student aid but also the infrastructure of the school for long-term sustainability.

“So basically what we're doing right now with Title III is we're keeping the house clean on the outside. We're able to, basically, keep the doors open with this money but we need some money to help us build a stronger foundation,” he said.

“We need some research dollars that help us push off. Because once we get that, then we can start actually building new floors on the house. We can start adding new bedrooms. What Title III is doing is really keeping the lights on and keeping us going.”

Ivory Toldson, a professor at Howard University, agreed. He runs the group Quality Education for Minorities, which aims to address the disparity in research funding. He noted that Johns Hopkins University, for instance, received, more research funding than all HBCUs combined.

“We know that if HBCUs can build up their research apparatus they can not only get more money for their research and also lead to things like patents. But they could also contribute more knowledge to our society,” he said.Paul Quinn College entrance sign.Roberto Hernandez / Paul Quinn College

At Paul Quinn College, 85 percent of its students rely on Pell Grants and 70 percent of students have zero expected family contributions, where the on-campus, full-time tuition is roughly $15,500 a year for a bachelor’s degree.

“They're taking out the loans because there's less money in their families and in their communities,” Sorrell, the college’s president, said. “So, part of the reason there's less money is that they've had to deal with systemic inequities for their entire lives.”

The school has had a six-figure surplus, Sorrell said, for most of his tenure, which has allowed the school to open new buildings, turn around its enrollment numbers and support its students and faculty. The football field is now an organic farm, and Sorrell said he has no plans to reinstate the program.

He said he’s now more focused on the academic and financial stability of the school.

“When you've given your heart and soul and time to an institution that is failing, you suffer great remorse and there's great sadness, but it doesn't mean that you give up, but you just breathe, you find another way,” he said.

But to him, eliminating the program was the only way the historically black college in Dallas, which was founded in 1872 by a group of preachers from the African Methodist Episcopal Church to educate freed slaves and their children, could get back on track.

Football had cost the school roughly $600,000 to $1 million a year, he said, and scholarships went mainly to the players. Meanwhile, other students struggled, faculty and staff members were leaving, and buildings had fallen into disrepair.

"We were roughly 18 months to 24 months away from closing. //

“When you've given your heart and soul and time to an institution that is failing, you suffer great remorse and there's great sadness, but it doesn't mean that you give up, but you just breathe, you find another way,” he said.

I don't think any of us can imagine how much guts it takes for a college president to make such a decision, since he is going to have several decades worth of alumni crawling his frame. He's a hero.

I would suspect the he is at the leading edge of a contraction that will be more widespread in the next ten years. Collge football is an obscenity anyhow, and is a "keeping up with the Joneses" thing among college presidents and alum. It's gong to become increasingly unsupportable as sports schools continue to separate into haves and have-nots. Most SEC schools actually have better facilities than several NFL teams (thinking Oakland and Buffalo here) and operate professional style programs. The fact that student fees go to subsidize some part of this (when the schools are awash in $millions in TV money) is criminal.

Just another conduit scheme coming to an end, as the credential becomes increasingly less able to reward the pile of student debt that finances its acquisition, and people becomes increasingly less relevant to how people have to live their lives.

Bill would wipe out most of the country’s outstanding student loan debtPublished 2 hours agoAnnie Nova@AnnieReporter

Key Points

Democratic presidential candidate Elizabeth Warren isn’t waiting for the election to push forward her proposal to erase the majority of the country’s outstanding student debt. The Massachusetts senator and Rep. James E. Clyburn (D-S.C.) announced on Wednesday their plan to introduce legislation in the House and Senate to eliminate up to $50,000 in student loan debt for 42 million Americans.

Democratic presidential candidate Elizabeth Warren gestures as she speaks during a campaign stop at George Mason University in Fairfax, Virginia on May 16, 2019.Mandel Ngan | AFP | Getty Images

Democratic presidential candidate Elizabeth Warren isn’t waiting for the election to push forward her proposal to erase the majority of the country’s outstanding student debt.

The Massachusetts senator and Rep. James E. Clyburn (D-S.C.) announced on Wednesday their plan to introduce legislation in the Senate and House to eliminate up to $50,000 in student loan debt for 42 million Americans.

“It’s time to decide: Are we going to be a country that only helps the rich and powerful get richer and more powerful, or are we going to be a country that invests in its future?” Warren said, in a statement.

Outstanding education debt in the U.S. is projected to swell to $2 trillion by 2022, surpassing credit card or auto debt levels. Today, the average college graduate leaves school $30,000 in the red, up from $10,000 in the 1990s. Nearly one-quarter of borrowers are in delinquency or default.

In a post on Medium in April, Warren introduced her campaign proposal to eliminate student debt. The details of the bill are likely to be similar.

Borrowers with household incomes under $100,000 would be eligible to have $50,000 of their student debt scrubbed.

People who earn between $100,000 and $250,000 would be eligible for less forgiveness. For example, Warren writes, “a person with household income of $130,000 gets $40,000 in cancellation, while a person with household income of $160,000 gets $30,000 in cancellation.”

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And those who earn more than $250,000 would not be eligible for any debt forgiveness.

In all, more than 95% of student loan borrowers would see at least some of their debt cancelled.

The plan would be funded with a 2% annual tax Warren proposes to levy on accumulations of wealth exceeding $50 million, with an additional 1% on wealth exceeding $1 billion.watch nowVIDEO01:52Senator Elizabeth Warren’s college plan would cost $1.25 trillion over 10 years

In a recent Politico/Morning Consult poll, 56% of registered voters said they support the Massachusetts senator’s proposal to wipe out $640 billion in outstanding education loans by raising taxes on the wealthiest Americans.

As of now, three separate Democratic presidential candidates—Elizabeth Warren, Julián Castro, and Bernie Sanders—have released proposals to cancel vast quantities of America’s student debt. In doing so, they’ve taken an idea that once seemed like a fringe enthusiasm of the internet left and thrust it straight into the center of the White House race.

That makes now a good time to share an odd quirk about this topic that rarely if ever gets mentioned: Nobody really has any idea how much canceling all of the country’s student debt would cost.

I mean, somebody might. I imagine there could be some poor, Vitamin D–deficient creature locked deep inside the U.S. Department of Education guarding this secret knowledge. But I haven’t found them yet. Meanwhile, I have talked to economists, think tankers, and congressional staffers who all say the answer is still a mystery. “We spent a while thinking about if we could figure it out, and we just had no way,” Ben Miller, who heads up the higher education team at the Center for American Progress, told me. Adam Looney, a former U.S. Treasury economist now at Brookings who has long studied higher-ed finance, said much the same. “I agree that no one knows what it would cost,” he wrote in an email. Warren’s campaign tried to ballpark a price tag for her plan, but it was basically a guesstimate. According to one source I spoke with, the Congressional Budget Office believes that trying to calculate the figure would be “complicated.” In other words, Capitol Hill has no idea what a student debt jubilee would do to the budget, either.

Here’s the basic problem: In order to know how much student debt forgiveness would cost the government, you would need to know how much Washington actually expects to collect over time on its portfolio of outstanding loans. Bizarrely, the feds do not share that information. It publishes related figures. But there is no simple accounting statement that says, “We’ve already collected X dollars on these debts, and we expect to collect X more.”

Outsiders can’t reverse-engineer those numbers, either. Consider: The Department of Education currently has $1.16 trillion of direct loans on its books. In theory, it could collect more than that amount, or less. But how much more (or less) depends on the interest rates students pay, which repayment plans they choose, their remaining balances, how many borrowers eventually default, and how much debt the government will cancel at some point through the various forgiveness programs that already exist. Those details are not all publicly available; think tankers just don’t have enough pieces of the puzzle to complete the picture.

All of this might come as a surprise if you’ve read about how Washington sometimes makes a profit off student lending. But those estimates are based on how much the CBO thinks the government will make on new loans it issues over the coming decade, not the loans it already has on the books. When it comes to those, the government doesn’t really tell us much. The best we get is an annual report by the Department of Education that shows how much the value of its loan portfolio has gone up or down, but that doesn’t put a figure on what the whole thing is presently worth. Imagine if you could see that your 401(k) went up by $5,000 this year but had no way to figure out how much was actually in it. That’s more or less the conundrum education wonks who are interested in this issue are stuck dealing with.

All of this ambiguity can make it a little hard to debate the pros and cons of cancellation. After all, one of the big arguments against the idea is that it could be expensive, and there are other things the government might be better off doing with the money. But it’s possible that mass forgiveness would cost less than many suspect, since the government is already planning to wipe out a good deal of debt through different debt relief programs that are available to borrowers today, such as Public Service Loan Forgiveness. We just don’t really know.

There are some things about the economics of debt cancellation that we can more or less figure out. For instance, government surveys give us plenty of data on how much student debt different households owe and how much those Americans earn. As a result, it’s possible to say with some certainty that Elizabeth Warren’s plan, which caps forgiveness at $50,000 a person and lowers it for higher earners, would mostly help the middle class. At the same time, it’s pretty obvious that forgiving all debts, as Bernie Sanders has proposed, would give a disproportionate amount of help to lawyers and doctors with expensive professional degrees. In other words, we know enough for people to argue about it. “To be honest, the exact cost seems somewhat irrelevant given that I’m opposed to it on so many fronts,” Beth Akers, a senior fellow at the Manhattan Institute, told me. “If it were good policy then I’d endorse it even without a solid price tag.” The people who do think it’s a good policy feel that way too.

Earlier this week, Senator Bernie Sanders proposed cancelling all $1.6 trillion in outstanding student debt. Commentators on the left and the right quickly pointed out the obvious flaws. Much of the debt is held by borrowers with graduate and professional degrees who generally earn high incomes with the ability to repay. And for those who can’t, the government provides repayment assistance. But Sanders’s main justification for the debt cancellation, that it is merely the equivalent of the government’s Wall Street bailout, is another strong argument against his drastic plan.

As Sanders puts it, “If we could bail out Wall Street, we sure as hell can reduce student debt in this country.” It’s only fair, in other words.

There is no doubt that the banks received costly benefits from taxpayers during the financial crisis. What Sanders is ignoring, though, is that student borrowers already receive large benefits from taxpayers.

Nearly all of the outstanding student debt that would be cancelled was issued through a government-loan program. Yes, lawmakers helped Wall Street with a big government program, but if student borrowers already participate in their own program, aren’t the two groups now even? Throw in the fact that the main vehicle for the Wall Street bailout, the Troubled Asset Relief Program (TARP), was itself a loan program, and it is hard to argue otherwise.

Maybe Sanders believes that banks received better terms on their loans than students, or that they ultimately didn’t have to repay the debts. If so, he’s sorely mistaken.

Banks that received loans through TARP paid the government 5 percent interest for five years and 9 percent thereafter. The student-loan program today lends to undergraduates at 4.5 percent for up to a 30-year term. Most graduate students pay 6 percent. It hardly looks like banks got the better deal.

The same is true when we compare how much debt is written off. Under TARP the government cancelled $19 billion of loans made to financial companies. While that is nothing to sneeze at, the forgiveness benefits in the Income-Based Repayment program for federal student loans are projected to cost taxpayers a similar amount ($14 billion) every year. If Wall Street received something students didn’t, it is not in these numbers.

The only kernel truth in Sanders’s argument is to be found buried in budget tables which show that the government opened its wallet a little more for the banks than for students. At the depths of the financial crisis, TARP loans were expected to cost taxpayers $25 dollars for every one hundred dollars lent (a number that was later revised sharply lower). Student loans cost $21 dollars on the same measure today.

On most counts then, students and banks received remarkably equal treatment. Even the budget numbers that suggest banks had a slightly better deal are certainly not enough to justify cancelling $1.6 trillion in student loans. By that accounting, only the most minor change to the loan program is in order. A one percentage point reduction in students’ interest rates would probably do the trick.

If that sounds like an underwhelming proposal, that’s because it’s based on what turns out to be an underwhelming comparison.

It's one of the rules of electoral success: advocate policies that concentrate the benefits on an easy-to-identify interest group (preferably one that is sympathetic in the public eye) and disperse the costs onto the entire electorate. It's how we get Coke sweetened with corn syrup rather than actual sugar. It's also how we get proposals to cancel student loans. As my AIER colleague Will Luther points out, the fact that two of the Democratic frontrunners have made debt cancellation such an important part of their campaigns suggests that the issue is going to be with us for a while.

But would it be a good idea to cancel student debt? And importantly, how does even the prospect of canceled student debt affect people's incentives?

First, let's consider the quality of the policy. A lot of commentators are pointing out that it's fundamentally regressive, meaning that we're basically taxing the poor to pay the rich. As economist Alexander William Salter puts it in the Dallas Morning News, it's "a transfer of wealth to those with relatively high levels of expected lifetime income, at the expense of those with relatively lower levels of expected lifetime income." The idea might have some merit, but it will make wealth and income inequality worse rather than better.

Even saying that the idea might have some merit is perhaps too charitable. In 2011, economist Justin Wolfers called it the "Worst. Idea. Ever." in a Freakonomics post. Why? First, there's the distributional effect. If we're going to have policies that transfer wealth from one group to another, it doesn't make much sense to transfer wealth from taxpayers generally to high-income college graduates. As Will Luther and so many others have pointed out, a college degree brings spectacular financial returns. As a group, college graduates aren't "needy" by any reasonable definition.

Second, Wolfers points out that debt cancellation doesn't make college more affordable because it's a transfer to people who already went to school and who are already enjoying the returns on their investment. Third, he notes that a successful campaign to cancel student debt will encourage further wasteful lobbying for transfers. The "cancel debt" movement is already part of the fallout from past bailouts, subsidies, and transfers. Capitulating will only encourage more lobbying.

Hence, I think we would do well to focus on the downstream effect debt cancellation--or even the reasonable prospect thereof--will have on people's future incentives. Encouraging people to produce and exchange rather than lobby for transfers and special privileges are important parts of the problem of constitutional design that has animated so many scholars, among them Douglass C. North and James M. Buchanan.YOU MAY ALSO LIKE

The prospect of being able to enjoy good times now and stick other people with the bill later encourages people to be less-than-completely-responsible right now. My kids are seven, nine, and almost-eleven, and we're very fortunate in that I work at an institution with an employee tuition benefit (which means, of course, that my salary is lower--so it's not exactly "free" tuition), but there are a lot of other expenditures that go into college beyond tuition. If student debt cancellation is on the horizon within the next couple of decades, we now have an incentive to change how we plan to finance their college education and what they plan to study.

There are three important effects here. First, the prospect of student debt cancellation encourages us to finance the entire thing with borrowed money. Why pay now or go to the trouble of trying to earn scholarships if we can borrow on the cheap and have a reasonable expectation that taxpayers will ultimately be left with the bill? Second, why should we be price-sensitive college shoppers, and why should colleges work to contain costs if there's a good chance it will all be paid for with other people's money? Third, we have incentives to borrow a lot of money to pursue boutique degrees with limited job prospects if (again) we know that someone else is going to pay the bill.

As EconTalk host Russell Roberts explained it in the mid-90s, if we go to a restaurant and know that someone else is paying, we have incentives to order the best thing on the menu, drinks, appetizers--the whole lot. If you go to dinner with a few friends, it's relatively easy for you to monitor one another and check anyone who seeks to take advantage of the situation. It's a lot harder to do this in larger groups, and as the benefits get more concentrated and the costs get more dispersed over a larger and larger population, people have stronger incentives to take advantage of everyone else. What's more, given our psychological proclivities and our tendencies to be self-serving, it can be pretty easy to convince ourselves that we're actually doing everyone a favor by borrowing tons of money to study something that doesn't translate into employable skills.

Student debt cancellation is already suspect because it redistributes wealth upward. As we can see, the prospect of debt cancellation changes people's incentives for the worse. I don't know if I would call it the worst idea ever, but it's certainly not a good one.

10 mind-blowing facts that show just how dire the student-loan crisis in America isHillary Hoffower and Allana Akhtar

Student-loan debt is at record levels in the US. Boston Globe/Getty Images

Student-loan debt in the US is at an all-time high. The consequences of student-loan debt have a domino effect: Millennials are delaying life milestones because they can't afford them. Democratic presidential candidates have proposed policies to offset the cost of college. Visit Business Insider's homepage for more stories.

America is suffering from a student-loan debt crisis.

While wages have increased by 67% since 1970, according to a 2018 Student Loan Hero report, college tuition has increased at an even faster rate. Consequently, student debt has reached record levels.

It's part of the Great American Affordability Crisis. Coupled with the fallout from the recession and a high cost of living, student-loan debt has made it difficult for millennials to save and has forced them to delay milestones like getting married, buying a house, and having kids.

Democratic presidential candidates have been proposing policies to offset the cost of college. Sen. Elizabeth Warren introduced a $1.25 trillion plan to forgive most existing student-loan debt and provide universal free college. John Delaney, Rep. Seth Moulton, and Sen. Kirsten Gillibrand have proposed student-debt forgiveness or subsidized college for students who go into national service.

Meanwhile, Sens. Bernie Sanders and Amy Klobuchar, Rep. Eric Swalwell, and the entrepreneur Andrew Yang have offered proposals to reduce the cost of college and the burden of student loans.

Here are 10 facts that show just how dire student-loan debt in America is.1. The national total student debt is now over $1.5 trillion.Drew Angerer/Getty Images

The average student-loan debt per graduating student in 2018 who took out loans is $29,800, according to Student Loan Hero.2. College tuition has more than doubled since the 1980s.Jannis Tobias Werner / Shutterstock.com

From the late 1980s to 2018, the cost of an undergraduate degree increased by 213% at public schools and 129% at private schools, adjusting for inflation, according to Student Loan Hero, citing stats from The College Board.

During that time frame, tuition rose from $3,190 to $9,970 annually for public schools and from $15,160 to $34,740 for private schools.

Wages, meanwhile, have increased by 67% since 1970, according to a Student Loan Hero report.3. Three million senior citizens in the US are still paying off their student loans.Wikimedia Commons/CC 2.0 Attribution

Young people aren't the only ones paying off their debt. More than 3 million Americans aged 60 and older owe more than $86 billion in unpaid student loans, reported INSIDER's Kelly McLaughlin, citing Consumer Financial Protection Bureau (CFPB) data seen by CBS News.

To pay it off, they're turning to their Social Security benefits.4. As of May 2018, 101 people in the US owe at least $1 million each in student loans, according to The Wall Street Journal, citing the Education Department.AP Photo/Richard Vogel

Costs for professional degrees are rising, too. Five years ago, only 14 people in the US owed $1 million or more each on their federal student loans, The Wall Street Journal reported, citing the Education Department. As of 2018, that count had increased to 101 people.

Interest rates for graduate students have increased by more than 6% from 2004 to 2012, according to The Journal.

Consider Mike Meru, a 37-year-old orthodontist who owed $1,060,945 in student loans as of May 2018. He's expected to face a $2 million loan balance in the next two decades.

Meru's situation shows that despite high salaries, becoming a doctor, dentist, or even a lawyer isn't the path to wealth it once was.5. Black families carry more debt than white families and are more likely to default on their loans.Mario Tama/Getty Images

Black graduates default on their loans, meaning they do not make a payment for 270 days, at five times the rate of white graduates. They are more likely to default than white college dropouts.

A recent Wall Street Journal report found that graduates of historically black colleges had 32% more debt than students at other colleges and that most had not paid off any debt in their first few years out of school.

Carrying student loans keeps the wealth gap between black and white families startlingly wide: With student debt, young white families have 12 times the amount of wealth as black ones. Eliminating debt lessens the divide to just five times as much wealth.6. As many as 40% of borrowers could default on their student loans by 2023.Getty Images

A 2018 report from the Brookings Institution followed students who were paying loans up to 20 years after graduation. The report found that the rate at which people default on their loans continues to rise between 12 and 20 years after graduation.

By analyzing the rate of default 20 years after graduation for the those who started college in the years 1995 and 2003, the report predicted that nearly 40% of borrowers could default on their loans by 2023.7. Of consumers filing for Chapter 7 bankruptcy, 32% carry student loan debt.Brian Snyder/Reuters

Of that group, student-loan debt comprised 49% of their total debt on average, according to a new LendEDU study.

Chapter 7 bankruptcy is liquidation bankruptcy for people with limited incomes who can't pay back all or a portion of their debt. The goal is to discharge the debt.

Student-loan debt, however, is generally non-dischargeable in bankruptcy.

Read more: An astounding number of bankruptcies are being driven by student loan debt8. Student-loan debt is the reason 13% of Americans said they decided not to have kids.Brian Snyder/Reuters

That's among those ages 20 to 45 years old, reported Business Insider's Shana Lebowitz, citing a survey from The New York Times.

Student loan borrowers are also delaying or refraining from buying a house because they can't afford it.

"I don't feel comfortable taking a loan on a house while having student loans," Boone Porcher, a supply-chain consultant who owes $32,645 after five years at a public university, previously told Business Insider.

As another graduate, a water-resources engineer who graduated from a public university with roughly $25,000 in debt, told Business Insider, "I feel like buying a house is a total pipe dream at this point in my life, but I'm tightening my belt as much as possible to save for a down payment right now."9. Some have drawn parallels between the student debt crisis and the subprime mortgage disaster.Getty Images

The rate at which student-loan borrowers can't pay their debt looks a lot like the rate at which people could not pay their mortgages during the 2008 financial crisis.

As of 2017, default and 90-day delinquency rates for student loans hovered at 11%, according to a report by Citi Global Perspectives & Solutions. Delinquency rates during the mortgage crisis peaked at 11.5% in 2010.

The report found that those with lower debt are actually more likely to default, since those with more debt tend to have degrees that earn them higher-paying jobs. Those with less initial debt, meanwhile, likely dropped out without a degree to get them a better-paying job.

That's not the only parallel between today's student loan crisis and the last decade's financial crisis: US consumer debt altogether is higher than it was in 2008.10. Nearly 50% of millennials who have or have had student-loan debt think college wasn't worthwhile.MediaNews Group/The Mercury News via Getty Images

When asked whether it was worth attending college based on their current financial situation and their student loans, about 21% of respondents said "definitely not" and about 23% said "probably no," according to an INSIDER and Morning Consult survey.

Unsurprisingly, respondents who are still paying off their student-loan debt feel worse about having gone to college than millennials who have already paid off their debt.

Mike Meru the orthodontist is an interesting case. There has been a lot written about him. He went to the most expensive dental school in America, and borrowed 100% for living expenses, tuition, and books and a supplies.........for 4 years dental school PLUS two more years for a post-doc, which shouldn't have even been ALLOWED to happen, if you ask me.

He practices in an area near Salt Lake City that is an orthodontist's wet dream, demographically. He should be a millionaire, but he's scamming the system to try to avoid paying. He'll probably be successful. (BTW, he makes enough to drive a Tesla and take some nice vacations, from what I read.)

My daughter graduated with a MFA in music from Queen's College a month ago and she's already paid back half her grad school loan from her gig economy jobs.

These sob story articles are completely biased if you ask me. I'm not going to say anything else. We've been down this road enough.

It makes me long for a political party that has some kind of scruples. This is about another way for Democratic Party candidates to buy votes. Maybe if they promise enough freebies to enough people they can get enough votes to win an election without the working class, so they can happily continue to suck corporate dick.

Millennials Are Making Major Savings Mistakes Because They're So Worried About Student Loan DebtAlix LangoneJuly 8, 2019

Their challenge is to focus on two goals at once.

It’s no secret that many millennials feel regret over their student loans and prioritize paying them off as a result. But if you don’t start saving for retirement at the same time, you’re likely to end up with a different regret when your career is over.

A recent report from Bankrate found that three quarters of Americans of all ages have at least one regret about how they’ve managed their finances, but each generation felt remorse about different kinds of money missteps.

A lack of retirement savings worried baby boomers the most, while millennials rued their student loan debt and lack of an adequate emergency fund. Nearly one in five millennials cited student debt as their top regret, more than three times the number of baby boomers and more than twice as much as Gen Xers. But as those same millennials grow older, their lack of retirement savings will catch up with them if they continue to focus exclusively on paying off their loans.

Overall, 27% of Americans of all ages said their biggest missed opportunity was not starting to save for retirement earlier, followed by not creating a sufficient emergency fund (19%), and racking up too much credit card debt (16%). But the good news is that half of those surveyed said they were already working on resolving their money issues. And millennials at least have time on their side.

That’s why it’s important to tackle retirement saving goals at the same time as you pay down your debt. If you try to eliminate your debt first and delay contributing to your 401(k) or an IRA,you’ll miss out on compound interest, a powerful multiplier.